Hovde slams firm he helped found

Wisconsin Senate candidate Eric Hovde distanced himself this week from an investment firm he helped found, declaring that one of the companies he once headed made a “stupid-ass” move in a newsletter urging investors to profit off a shift in U.S. tax law.

The January 2009 newsletter was published under Hovde company letterhead and advised clients to “Let Uncle Sam Pay for Your Acquisition.” The title of the memo referred to a change in the Treasury Department’s interpretation of the tax code, which allowed firms to write off larger pre-acquisition losses of distressed companies they acquired.

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From a business standpoint, there was nothing wrong with the advice. But the document seems at odds with Hovde’s image as a political candidate, seeking the state’s GOP Senate nomination on a free-market, anti-bailout, anti-“crony capitalism” platform.

That’s a platform defined in more black-and-white terms than Hovde’s business career, which has featured all the complexity you’d expect from a deep-pocketed, highly-competitive investor.

Furthermore, one of Hove’s current firms, Hovde Capital, invested in companies that received millions of dollars in government bailout funds following the 2008 collapse of the financial sector. Hovde defends the practice by saying that none of his own companies received government aid.

Contacted regarding the 2009 memo and other questions involving his companies, which were brought to POLITICO’s attention by opponents of Hovde, the candidate said that document was a product of Hovde Financial. That’s an investment banking outfit he founded in 1987, and which his brother Steven has run since 2004. But Hovde explained that he is no longer a major stakeholder in Hovde Financial and sold most of the firm to his brother nearly a decade ago.

The “Uncle Sam” message went out three years ago under the logo of the Hovde Group — an umbrella for several properties — but specifically pitched the services of Hovde’s former firm in taking advantage of the tax-law change.

Hovde estimated that he now has no more than “a 5 percent stake” in that company, which he launched in the 1980s. Still, Hovde said, he was disappointed in the company’s choice of words.

“I’m kind of pissed off at the people on the investment banking side [Hovde Financial] who would ever write that — ‘Let Uncle Sam Pay for Your Acquisition,’” Hovde said. “When [an aide] showed it to me, I was like, ‘What the hell is this?’”

Hovde said he understands what the firm was getting at from a “technical” standpoint, but said that “doesn’t mean I was any less disappointed in how they phrased it … I just think it’s a stupid-ass way to phrase an industry update.”

Hovde Financial did not immediately respond to a request for comment.

Hovde is seeking the open Senate seat of retiring Democratic Sen. Herb Kohl. He is competing in a primary against several other Republicans, including former Wisconsin Gov. Tommy Thompson, state House Speaker Jeff Fitzgerald and former Rep. Mark Neumann.

A wealthy banker who has put a sizable amount of personal money into the race, Hovde founded Hovde Financial in 1987 and eventually branched out into a number of financial services-related areas. He is currently listed as CEO of Hovde Capital Advisers and Hovde Private Equity as well as a family-owned real-estate firm, Hovde Properties.

The Republican has introduced himself in TV and radio ads as an opponent of a too-cozy relationship between business and government. In his commercials, he condemns Wall Street bailouts and “corrupt investment schemes” and says it’s “time to end this toxic relationship between Wall Street and Washington.”